Conditions, Fees on Payroll Cards Drawing Attention
State officials and federal legislators have become interested in the conditions under which employers pay employees with payroll cards and the fees that issuers charge for those cards.
The topic of employees being forced to use payroll cards with fees as a condition of their employment has drawn attention from a Change.org petition and a class action lawsuit filed in Pennsylvania.
Now New York Attorney General Eric Schneiderman has launched an investigation into how large employers are paying hourly employees with payroll cards and has sent letters inquiring about their policies to 20 large employers in the state, according to the business consulting firm Ballard Spahr.
The firm reported that Schneiderman is concerned that the card's fees might not be fully disclosed or excessive.
The Attorney General's office has not yet confirmed the report.
In addition, 16 U.S. senators, all Democrats, have written the CFPB and Department of Labor asking the agencies to investigate whether the use of high fee payroll cards, after fees, prevents lower income workers from making a minimum wage.
“We strongly believe that your agencies have the capability to protect workers from at least some of the excessive fees and harmful practices associated with payroll cards,” the senators wrote in their July 11 letter.
“Accordingly, we respectfully request that your agencies take a closer look at whether workers adequately understand these fees, what effect these fees have on employee income in the aggregate, and whether particular fees might violate Regulation E, which implements the Electronic Funds Transfer Act, or the Fair Labor Standards Act.”
The senators called the possibility that some employers might have begun coercing or “inappropriately” pressuring employees to take payment on these cards over other methods also worrying. They wrote that requiring employees to take the cards “seems clearly to violate federal law.”
The legislators also asked Cordray look into whether some employers have been getting paid for the numbers of employees that they steer onto the cards.
“This situation creates an obviously perverse incentive structure in which employers could be rewarded for steering their own employees toward high-fee products,” the letter to the CFPB said.